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Discovery of Nonparty Foreign Affiliates Must Be Tempered by Proportionality

The court’s opinion affirms the principle that relevance, even in the context of a foreign affiliate, must always be tempered by considerations of proportionality, thereby providing defendants an effective argument when opposing plaintiffs’ efforts to reach international materials.

The discoverability of documents held, and depositions of individuals employed, by foreign affiliates of a U.S. party is of critical interest to any multinational corporation. The introduction of foreign discovery can significantly increase the cost, complexity and burden of discovery, not to mention the obligation to preserve and its attendant spoliation risk. Invoking the proportionality principle embodied in the recently amended Federal Rule of Civil Procedure 26(b)(1), U.S. Magistrate Judge Joel Schneider, presiding over discovery in the Benicar products liability multidistrict litigation (MDL), recently denied the plaintiffs’ motions to compel (1) the U.S. depositions of two German citizens employed by the defendant’s European affiliate and (2) production of the European affiliate’s documents. In re Olmesartan, 2016 U.S. Dist. LEXIS 137839 (D.N.J. Oct. 4, 2016). The court found that Rule 30(b)(1) did not support the plaintiffs’ demand for U.S. depositions of two foreign nonparty employees and that such depositions would not be proportional to the needs of the case given their likely duplicative nature and the fact that causation discovery had been largely completed. The court reasoned that, if it permitted depositions to fill every conceivable perceived gap in discovery, it would be abdicating its duty pursuant to Rule 26(b)(1) to efficiently manage the litigation. Similarly, while it was undisputed that the foreign documents were within the custody and control of the defendant, the court denied the plaintiffs’ motion to compel as overly broad and far-reaching.

The Benicar MDL comprises claims alleging that the blood pressure medication Benicar causes gastrointestinal and other injuries. The defendants include Daiichi Sankyo, a U.S. corporation; Daiichi Sankyo U.S. Holdings, its U.S. holding company; and Daiichi Sankyo Ltd., their Japanese parent company. The court had limited the scope of discovery to general and specific causation, and the parties had largely completed that discovery, which was limited to U.S.- and Japan-based witnesses and documents. In the United States, the plaintiffs moved to compel the depositions of two German citizens who were high-ranking executives of the defendants’ European affiliate, which was not a party to the litigation. The plaintiffs insisted on the depositions because the executives were part of a global management structure and had extensive involvement with pharmacovigilance activity about the injury in question. The plaintiffs also demanded production of the European affiliate’s documents.

The court held that the plaintiffs could not compel a nonparty witness to appear for a deposition in the United States because Rule 30(b)(1) only reaches employees of parties to the litigation. The court distinguished between requiring a corporation to produce affiliate documents within that party’s control from requiring an affiliate to present a witness for deposition. The court rejected the plaintiffs’ reliance on a case it deemed an outlier that conflated the standard for production of a corporate affiliate’s documents with the standard for production of a corporate witnesses for deposition: While a party may be compelled to produce foreign documents within its custody or control, that principle does not extend to witnesses. The court reasoned that — unlike the language of Rule 34, which addresses production of documents and things within a party’s possession, custody or control — Rule 30 does not require a party to produce persons for deposition who are merely alleged to be in the party's control. Rather, a party or any other person can be noticed for deposition and subpoenaed if necessary.

The court also rejected reliance on Rule 30(b)(6) for the principle that, if a corporation can be compelled to prepare a witness to testify about foreign information within its custody or control, it can be compelled to produce a witness for deposition.

Given the breadth of discovery already taken, the defendants’ production of tens of millions of pages, and 38 employee depositions taken by the plaintiffs, the court refused to authorize more depositions unless the new testimony was likely to be noncumulative. In other words, “the requested depositions must be ‘proportional to the needs of the case.’ . . . In view of the Court’s intimate knowledge of the litigation, and the fact that the current focus of discovery is general and specific causation, the Court finds that in this instance the proportionality analysis weighs in defendants’ favor.” While the plaintiffs insisted that the foreign executives would have specific knowledge of a German report on the injury in question, the court reasoned that, if it permitted additional depositions to be taken to answer every perceived “gap” a party raises, discovery would never end. Moreover, citing the Advisory Committee note to Rule 26(b)(1), the court concluded that to do so would be to “abdicat[e] its role to efficiently manage the litigation.”

The court denied the plaintiffs’ motion to compel documents from the European affiliate, even though the documents were in the defendants’ custody and control, because the requests were overbroad and far-reaching. The court made clear that it was not foreclosing discovery of European documents, but that the “plaintiffs’ requests must be specific, focused and narrow.”

The court’s opinion affirms the principle restored to prominence in the amended Rules that relevance, even in the context of a foreign affiliate, must always be tempered by considerations of proportionality, thereby providing defendants an effective argument when opposing plaintiffs’ efforts to reach international materials.